A miniature theme-park carousel set the scene for the 500 black-tie guests as they arrived at the art deco hall on Melbourne's St Kilda Road.

Once inside they were entertained by a fire-eater, a snake charmer and a mermaid in a bath atop an ornate table. As the drinks flowed, a burlesque stripper performed on a stage. The theme, according to the invitation, was "Le Rouge Folie – a Hedonistic Playground" and so it was, culminating in eight dancers performing a high-energy can-can before bending over to reveal their knickers, each bottom adorned with a letter, spelling out the name: W A I S L I T Z.

Billionaire investor Alex Waislitz, resplendent in ringmaster's red coat and top hat, couldn't have looked happier. The festivities, held in February, marked both his 60th birthday and the 25th anniversary of his Thorney Investments Group. Toasting his success were fund managers David Paradice and Geoff Wilson. Ardent Leisure chairman Gary Weiss was there, along with Jeanne Pratt and Waislitz's brother-in-law and fellow Rich Lister Raphael "Ruffy" Geminder.

The Financial Review Rich Lister Waislitz is separated from wife Heloise Pratt, daughter of Jeanne and the late Richard Pratt, but she was there greeting guests, from the chief executives of small-cap companies to Eddie McGuire, who is on the Collingwood AFL club board with Waislitz, and Molly Meldrum, a long-time Pratt family friend. Hours later, after espresso martinis in a secret room at the venue, a select few kicked on until sunrise at Waislitz's nearby Toorak mansion.

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It was, as one attendee later put it, "probably Alex's best party ever". But make no mistake, for Waislitz it was a mixture of business and pleasure and the peak example of how, by combining both, he has quietly racked up one of the best individual investment performances on the Australian stockmarket in the past couple of decades – if not the very best.

Waislitz worth $1.39 billion

His $1.39 billion fortune – with trimmings such as a house on New York's Upper East Side and private jet – has all been made from a parcel of shares worth $1.15 million a quarter of a century ago, a present from his grandmother-in-law, Paula Pratt.

It is an old school way of doing things, a shoe-leather approach to investing through dozens of meetings, business trips, coffees, lunches and dinners. Waislitz may be a stock picker, but first and foremost he picks people. It's an approach antithetic to much of the market at a time when more and more money flows into passive pools such as index funds, or towards algorithmic traders where computers are in charge.

"Maybe others are using LinkedIn or something like that now to make connections," Waislitz tells The Australian Financial Review Magazine. "I still like looking someone in the eye and talking to them. You get the nuances of what they mean. You can see the energy levels and positiveness; you can tell when the company is going well and they're feeling confident and you can certainly see the opposite when they're struggling or under the pump."

It has all been done with his own money, grown from that initial $1.15 million. Thorney is effectively a family office, but while other wealthy families mostly outsource their investment strategy, Waislitz does his in-house. He's the only fund manager who has his own wealth at stake in every single transaction.

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"He's taken a couple of million dollars and turned it into more than a billion dollars," says fund manager Geoff Wilson. "He's shown the value of compounding your returns at a high rate. Warren Buffett does that. Is he the Warren Buffett of Australia? People can judge that. But what Alex has done is amazing. He shows that with some intelligent investing and some patient capital you can create some very significant wealth."

Among Alex Waislitz's big hits in the past year alone have been superannuation technology platform Hub24, up 127 per cent, logistics tech play Yojee, up 123 per cent, and financial technology company Afterpay Touch, which has risen 105 per cent. In December 2013 he branched out and took public money for the first time, launching the listed investment company Thorney Opportunities. Its share price has more than doubled since and its net tangible assets have also risen more than 60 per cent.

Another listed investment company, Thorney Technologies, was launched in December 2017 to focus on listed technology companies and unlisted start-ups. Its share price has risen about 10 per cent since, and its net tangible assets are up about 25 per cent. The performance of the listed entities hint at the track record of his private Thorney group, in which internal rates of return for private property investments have lately averaged 15 to 25 per cent per annum.

Waislitz's record is so good that executives of some of the companies in which he has invested have in turn invested in him.

Alex Waislitz at his home in Toorak, Melbourne. "I'm very competitive," he says. "I get pissed off when we lose money."
Arsineh Houspian

Among them are Mon­­adelphous chairman John Rubino, Mesoblast chief executive Silviu Itescu, property developer Bill Bowness, recruitment industry veteran Victor Plummer, as well as billionaire Marc Besen, former Redflex chairman Tim Findlay and Richard Noon, the former chief executive of online travel services provider Webjet. Other investors in Thorney include Rich Listers Frank Costa and Dale Elphinstone. Each year Waislitz gives a prize to the boss of the company in his investment portfolio that makes the best return. At his party in February, the prize given out was a trip for two to Paris to see the Moulin Rouge.

Push for change at GetSwift

It's not always so chummy: his small team of 13 employees hunt for companies that have stumbled and push for them to be overhauled and their management changed. "As we envisaged when the company was founded, it has become a thorn in the side of under-performing small cap companies, overpaid bosses and lazy boards," Waislitz tells the party.

Of late he's been agitating for change at GetSwift, the logistics company whose share price stepped off a cliff in February after it emerged its touted contracts with the likes of Amazon were not as binding as investors were led to believe. Waislitz owns about 1 per cent of the company. But even when he should be down, in reality he's still up, having doubled his money since buying in at GetSwift's listing in 2016.

The Rich List 2018 is published in the AFR Magazine on Friday, May 25, inside The Australian Financial Review.
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And there's always room for fun. The Waislitz way involves annual trips to exotic locales with a group of fellow fundies in search of industry and commodity trends. They've visited the Gobi Desert to study Mongolia's commodity boom (and to play a game of camel polo). While travelling through China, Waislitz noticed huge barges travelling down the Bund in Shanghai, prompting him to go long on coal and iron ore. Searching for a bar in St Petersburg, Russia, he pushed open a stage-door in a quiet street and accidentally stepped through a heavy curtain into a live sex performance.

The risk-taking is balanced by some perceptive risk-aversion strategies that have kept the Waislitz wealth intact over 25 years, as party guest and former Domain Group chief executive Antony Catalano notes: "Alex is a curious and unusual mix of flamboyance mixed with a sensible dash of conservatism. He can stand out in a crowd while simultaneously sit back and watch the crowd. He has a wonderful sense of adventure in his personal life, some of which involves risk, and he is also a risk taker in business. But like his personality the risks are well considered and very measured."

Zenith Energy post-party deal

Moving through the crowd at the party was Doug Walker, chairman of small ASX-listed company Zenith Energy. He had flown from Perth at Waislitz's behest, and with some intrigue, given Thorney Investments at that stage held a 4.5 per cent stake in Zenith. Says Waislitz: "He was kind enough to come along and introduce himself personally and say thanks to me for being a shareholder. I told him we were excited but were staying below the 5 per cent [substantial shareholder mark] as we hadn't had time to meet."

But on the Monday following the party, Waitlitz, Walker and Zenith's CEO got on the phone, and afterwards Thorney doubled its stake to above 10 per cent. "If that turns out to be the success we hope it will be, the pay back from the party will be tangible," Waislitz says. "Maybe we would have bought it eventually, but it brought it on earlier. They didn't tell us anything that wasn't public anyway, but I was motivated about his enthusiasm." Zenith's share price rose about 10 per cent in value over the next month, giving Waislitz an immediate return.

In staying close to the people and companies he invests in, Waislitz echoes the practice of fellow Rich Lister and fund manager David Paradice, who once told the AFR Magazine about being relentless in his pursuit of slivers of information to gain an advantage for investment decisions. Some have wondered if such a tactic crosses a continuous disclosure line, amounting to obtaining information that should be given to all investors equally. Waislitz's retort is that he's always taken a conservative view and has never gotten in trouble with the regulator. "I'm proud of that record and want to keep it, and it's even more important now we have two listed vehicles and manage external money," he says.

When answering the AFR Magazine's questions, Waislitz gathers his thoughts before launching into methodical, extensive responses. He appears to be an introverted extrovert, and his way of talking seems to match how he invests. He follows the market avidly, getting daily reports and a weekly print-out that he studies over the weekend. One interview we set up is delayed due to a sudden fall on Wall Street. The market later corrects, but Waislitz is clear that watching it is a priority. During two extensive interviews, he often checks stock prices on his phone.

But it is watching people that seems to most help him beat the market. Waislitz's doubling down on Zenith encapsulates his desire to find an entrepreneurial streak in a company's founders and management. "I concentrate on the people at the helm. Do they have the passion, the drive, the moral incentive and the financial incentive to live out a dream for that company," he says. They're traits that might remind Waislitz of something about himself, an entrepreneurial spirit that evolved during his childhood in Melbourne.

Son of migrants

The son of Jewish migrants, he grew up in the south-east suburb of Ormond. His father David had arrived from Poland in 1939, aged 18, and in 1948 headed to Israel to fight the War of Independence. He then married Waislitz's mother Ruth in Israel and became a strong believer in human rights, equality and fairness. "He gave me the expression 'if you are not a socialist when you are young then you have no heart. And if you are not a capitalist when you are older, you have no head.'"

While his parents worked multiple jobs, Waislitz started delivering newspapers at 11 and then began riding around the neighbourhood collecting metal from abandoned housing lots to sell to a scrap-metal merchant. He used the money he made to buy a bigger bike and a larger box to place the scrap in.

At 13, a friend of Waislitz's father bought him some BHP shares and explained how the stockmarket worked. The lessons stayed with him as he undertook a law and economics degree at Monash University and then moved to New York in the early 1980s in the hope of finding work as a lawyer.

He stayed with a friend from his university days, a medical student and now CEO of stem cell biotechnology firm Mesoblast, Silviu Itescu, who was working at a hospital in what was then known as Spanish Harlem. These were different times in the now gentrified city. Waislitz recalls stabbings in the hospital car park and running the gauntlet of a few blocks from the subway station to the hospital, where he bunked in with Itescu and had managed to be registered as a doctor himself.

"I used to run from the subway down the middle of the road because you'd be worried about being dragged into the laneways and being mugged. They had the overnight on-call room for doctors on duty, and one night I got busted by a doctor who took a nurse in there. He reached down to his ankle and pulled out a small gun. That's how rough the neighbourhood was. And by the time I heard 'Dr Waislitz please come to surgery' over the loudspeaker one day I knew the gig was up."

Working for Robert Holmes a Court

Waislitz found a job with stockbroker and investment banker Prudential Bache. After a year he figured he didn't want to sell stocks but enjoyed working on investments and started hitting up entrepreneurs in an effort to stay employed in New York. "I ended up landing a job with Robert Holmes a Court [and] I did it by cold letter. I wrote to him and hounded and hounded him. He liked my letter but said he didn't know me so referred me to Alan Newman in his London office. I'd ring [Alan's] PA every day and in the end she took pity on me and said Alan was going to New York in a couple of weeks' time. So eventually I met him; he liked my perseverance and said I had been wearing his PA down and she said to give me a chance. And he did."

Eddie McGuire and guests at Waislitz’s birthday party in February.
Regina Karon

Holmes a Court was then at his corporate-raiding best, his Bell Group was making big profits on plays for BHP, Carlton & United Breweries and owned a slew of media and mining assets in Australia and the UK. Waislitz spent four years working for the legendary investor and says his influence was profound. "He was very much about concentrating on the leadership and on the balance sheet to uncover hidden jewels either in the form of undervalued real estate, brands or intangible assets that could actually become tangible. He liked companies that he thought were fat with costs and expenses and big offices. He also imparted to me that essential, intuitive part of any successful investor's make-up: the ability to see where a company might be in the future."

When the stockmarket crashed on October 19, 1987, it was Waislitz who phoned Holmes a Court in Perth to tell him the market was diving. He watched as his boss desperately tried to unwind his portfolio. Holmes a Court would lose much of his $1.4 billion fortune due to carrying large amounts of debt, though he became a large landowner before his death in 1990. The episode taught Waislitz about making oneself vulnerable and the perils of overexposure.

He returned to Australia and looked for another entrepreneur to work with, meeting with Larry Adler and Leon Fink. He was offered jobs with Christopher Skase and Alan Bond and spoke to Kerry Packer's Consolidated Press Holdings. But eventually in 1990 he took a job with Melbourne cardboard box manufacturer Richard Pratt, in the corporate and financial division of his Visy Group.

Soon he was attending the billionaire's famous Chinese takeaway Sunday evening gatherings of family and friends at his Raheen mansion. There he met and started dating Pratt's eldest daughter Heloise. The pair married in 1994 and have three children: Jake, Milly and Joseph.

From $1.15 million to $4 million

In late 1991, Waislitz went to Pratt with the idea of starting an investment company. Though reluctant at first, Pratt eventually agreed, on the proviso no money was taken from Visy's manufacturing business, which was then struggling under considerable debt. Having found a pile of Amcor shares owned by Pratt's mother, he was given permission by Pratt to liquidate them and start trading part-time.

He had early wins on shares in media company Southern Cross and manufacturing firm Austrim. The $1.15 million of Amcor shares turned into $4 million after a year, and grew to $7 million the next. By then he was ready to break away from the Pratt empire and devote himself to Thorney. He took Ashok Jacob, an employee of Visy subsidiary Battery Group, with him. They struck a deal with Rio Tinto to sub-lease some space at 55 Collins Street, stripping copper and bronze panels from the walls and selling them to help pay for an office fitout. His activist mantra evolved from focusing on micro caps, for which he had enough investment firepower to get an audience with management. Few others played in the same space.

Even today, Thorney concentrates on buying into companies with market capitalisation of less than $200 million. Waislitz will often buy between 5 and 30 per cent and engage with management to improve performance. "It is up to them whether they act on our advice," says Waislitz.

There have been some bruising battles along the way. He engineered board and management change at red-light camera company Redflex as well as contract labour services company Skilled Group. Thorney battled prominent Sydney property executive Greg Paramor for control of Melbourne group Folkestone in 2011 and while Paramor's plan to recapitalise and take the helm of the business eventually was approved, the deal was considerably better for shareholders than the first offer. "Looking back, I make no apologies for playing hardball," says Waislitz.

Blunt management advice

That mentality even extends to long-term friends like Itescu at Mesoblast, which shares an office floor in Collins Street with Thorney. Waislitz has made plenty of money buying and selling Mesoblast stock and remains a big holder. But the company has stumbled in the past year and big shareholders have sold out. Waislitz is blunt when discussing his friend's company. "I think he needs to strengthen his board, it's stale and not sufficiently experienced for the internationalisation of the company," he says. "Maybe the best thing for the company is him becoming executive chairman. Maybe he needs an experienced CEO or COO to run the day-to-day operations. He's a dear friend and I want him to have success, but I have a responsibility and a fiduciary duty to my investment team. But I probably haven't been aggressive enough with Silviu as I have with others."

Monadelphous chairman Rubino says of Waislitz, with a chuckle: "He's not afraid to give us advice. He will push very hard and while he is not aggressive, he does not give up easily. So I will listen but probably still do what I want to do. Alex has mellowed a lot in recent years."

A mark of Waislitz's loyalty can be seen through his friendship with Antony Catalano, with whom he owns Cafe Brass in Richmond. Thorney is a shareholder in Fairfax, publisher of AFR Magazine, and Waislitz had been instrumental in the company spinning out its real estate listings business Domain to realise its value, rather than selling it to private equity. Two months after listing, Catalano quit as Domain CEO amid allegations of staff misbehaviour.

Few have taken Catalano's side after his abrupt exit, but Waislitz says Catalano is the best person to lead Domain and that he will continue to support him in the future – publicly and financially. "I'm going to stick by Catalano, he's a good bloke and I like his approach to life and family and I have no hesitation in saying that. If something untoward comes out later on, we'll address that with different information. I've spoken to him many times and said I'm a backer of your next venture, whatever that is. And we're talking about a number of opportunities in that regard. And I will stick to my word."

Tech businesses and AI

These days Thorney is increasingly investing in technology businesses. Waislitz foresees a comeback for the mining services sector (he's been putting money into several stocks in the industry since late last year). He also is a believer in the continued strengthening of the US property sector and wants to have 50 per cent of Thorney's assets there within five years. Eventually he would like to see his three teenage children involved in the business, but will not push them – he wants to lead Thorney for another decade, to keep seeking better returns and finding hidden gems in the market.

The mermaid in the bathtub was part of the entertainment for Waislitz's 500 party guests.
Regina Karon

Waislitz also wants to learn more about tech companies and the potential use of artificial intelligence when investing. He's been putting money into the odd quant fund to gain an insight into how they work and as a possible hedge against his own human-orientated stock picking style. Above all, his passion for investing drives him, along with his aversion to losing money.

"I'm very competitive. I still get pissed off when we lose money. It's not the money per se, it's an acknowledgement we made a mistake, we weren't smart enough, we were outmanoeuvred, we should have done more work. I love the game of investing and the challenge of uncovering value – with all its cut and thrust. The aggressive side, the defensive side and the optionality of creating different outcomes. That is what drives me to be successful and stimulated. I know it is a cliché but I view the money and the size of the Thorney balance sheet as just a sign of our success. It is the scorecard."